The concept of absorptive capacity was first defined as a firm's "ability to recognize the value of new information, assimilate it, and apply it to commercial ends" by Cohen and Levinthal. ... A firm's investment in R&D then impacts directly its absorptive capacity.

What is absorptive capacity?

Definition. Cohen and Levinthal (1990) introduced the notion of absorptive capacity as the firm's ability to value, assimilate, and apply new knowledge for improving organizational learning. The notion of absorptive capacity refers to the capacity of a recipient to assimilate value and use the knowledge transferred.

What is meant by absorptive capacity in economics?

Absorptive capacity is the ability of a firm to recognize, assimilate and commercialize the value of external knowledge (Cohen and Levinthal 1989, 1990).